Okay, so what I'm reading here is you want timeout to be an opportunity for them to calm down (if being overexcited is part of the problem). But you know, some kids don't know how to do this, and sending them off by themselves is kind of like handing a child a math book and telling them to go read it by themselves in the hopes they'll learn math. She needs help learning how to calm down, and I don't think timeouts achieve this. I think kids need to learn these things from the adults around them through modelling and active help.
As for the baby thing, well kids that age have so much energy and enthusiasm and personally I think it's really hard for them to just "control" themselves, even when they know they should, or know their actions could be harmful. As you said, she isn't intentionally trying to hurt the baby, so you must conclude that the reason she doesn't stop the potentially dangerous play is because she
can't. She sounds like a wonderfully intense, spirited, imaginative little girl and you really don't want to stomp that out of her, you know?
And the 5 year old, well...I really have to LOL at him, though I'm sure it isn't so fun for you! I mean, the whole "him trying to punish you guys" stuff is really a mind-opener, isn't it? KIDS LEARN BY MODELLING YOU. By using punishment as a technique you are teaching your child that this is how we react when we have a problem. Example: he's running around having fun but it's driving you nuts and things could get broken/hurt...this is YOUR problem. So to "fix" it, you impose a punishment on him because you are bigger and you can. Now...later on in the day, something you do is bothering him so what does he do? He threatens to punish you. He learned his lesson well, didn't he?
Smart little kid!
You say "the funny thing is, the more timeouts he gets, the worse the behaviour". Well, to me that is perfectly logical and I don't find it strange at all. Punishment of any form causes human beings to go on the defensive, and when you are 5 years old, using strong words is about all he's got. When he says he doesn't like you, and won't go, etc...well, he's trying to tell you how he feels - isn't that a good thing? I mean, shouldn't he be allowed to express himself? Sure, the delivery needs help but...
Anyways, I'm asking you these questions (with a smile on my face) not to be critical but just to get you to think. You may have used timeouts successfully, but each child is different. Personally, I believe punishment affects all kids the same emotionally - they get angry, resentful, and don't like it. But while some may just "take it", others fight back. I think that is what you are finding with your kids. What they are doing is so normal - you should read Alfie Kohn's book "Unconditional Parenting". This is exactly what he talks about.
So...my advice (if you still want it <wink>) is to cut out the punishment and imposed consequences. Your kids are obviously way too bright and energetic for that. Frankly, they sound like a fabulous bunch of people and it would be a real shame to squelch any of that. Such intelligence and creativity should be taken advantage of - get them involved in solving problems! Get them to figure out what solutions should be implemented! Teach them by actively
teaching, not by using punishments and arbitrary consequences.
Anyways, hope this helps. Your kids sound wonderful!